How Cryptocurrency Is Handled in California Divorce
Cryptocurrency has become a significant financial asset for many California residents holding bitcoin, ethereum, solana, cardano, ripple, and other digital currencies as part of their investment portfolios. For couples going through a divorce, however, cryptocurrency is considered property and is subject to division. Unlike a traditional checking or retirement account, cryptocurrency can be difficult to value, and easy to move and conceal. Understanding how these assets are classified, valued, and divided can make a real difference in your financial outcome during divorce.
Crypto is Property Under California Law
California is a community property state, which means that most assets acquired by either spouse during the marriage are owned equally by both. Under California Family Code section 760, all property acquired by a married person during the marriage is presumptively community property, and that includes cryptocurrency. It does not matter that only one spouse managed the account or that the holdings exist on a blockchain rather than at a traditional financial institution. If the cryptocurrency was purchased with marital funds during the marriage, it is presumptively community property and subject to equal division between the spouses.
Cryptocurrency purchased before the marriage, or received as a gift or inheritance by one spouse individually, is presumptively separate property under California Family Code Section 770 and would not be subject to equal division between the spouses. The challenge, as with many assets in divorce, often comes down to documentation and proving the origin of the funds used to make the purchase to prove its separate property characterization.
Why Dividing Cryptocurrency is More Complicated Than it Sounds
Dividing traditional assets like a bank account or a retirement account is relatively straightforward compared to dividing cryptocurrency. Several factors make the process more complex:
- Valuation timing is a genuine issue because cryptocurrency prices can swing dramatically in a matter of days, making it difficult to pin down an agreed-upon value;
- Holdings can be spread across multiple wallets, exchanges, or hardware storage devices that are not always easy to locate or access;
- One spouse may be far more technically knowledgeable than the other with understanding private keys, wallet addresses, staking rewards, decentralized exchanges, and blockchain transactions, creating an information imbalance and potential concealment;
- Transferring crypto carries potential tax consequences, including capital gains liability, that need to be factored into the overall settlement; and
- Some spouses attempt to conceal holdings by moving assets to anonymous wallets or transferring them to third parties before the divorce is finalized. This makes it very difficult to verify whether all digital assets have been fully disclosed.
That last point is worth taking seriously. California law imposes a fiduciary duty between spouses during divorce proceedings. Under California Family Code Section 1101, a spouse who hides or misappropriates assets may be ordered to pay the other spouse up to 100 percent of the asset, in addition to attorney fees.
Disclosure Requirements and Finding Hidden Cryptocurrency
Both spouses in a California divorce are required to submit complete and accurate financial disclosure statements, which must include all cryptocurrency holdings. If you suspect your spouse is hiding digital assets, there are ways to investigate. Blockchain transactions are recorded publicly on a ledger, which means forensic accountants and attorneys experienced in high-asset divorce can sometimes trace transactions and identify wallets that were not disclosed. Exchange account records, tax filings, and bank statements showing transfers to cryptocurrency platforms are also useful sources of information.
If you hold cryptocurrency yourself, full and transparent disclosure is the right approach. Attempting to conceal assets is not just legally risky; it can permanently damage your credibility with the court.
Reach Out to Our Firm Before Your Case Gets More Complicated
Cryptocurrency values can change dramatically between the time a case is filed and when it settles or goes to trial. Having skilled legal guidance early in the process helps protect your interests, whether that means identifying hidden assets, navigating valuation disputes, or negotiating a settlement that accounts for volatility and tax implications. Our San Francisco divorce attorneys at Cardwell Steigerwald Young LLP are experienced at handling complex, high-asset divorces throughout the Bay Area. Contact us today to speak with our team about your situation.
Sources:
California Family Code section 760.
California Family Code section 770.
California Family Code section 1101.
